Former New York Fed President Bill Dudley Talks September 11 Experience

SPEAKER_1 (0:02)

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Romaine Bostick (0:07)

We kick off The Close today with none other than former New York Fed President Bill Dudley, former economist at Goldman Sachs, and also a Bloomberg opinion economist. Bill, it's great to see you, and we're definitely going to talk rates and inflation and all the other things we normally bore you about.

But you know, I was looking back at what transpired on 9-11, and particularly the big FAA ground shock that went into effect at about 9:45 a.m. that morning. There are a lot of flights that were not allowed to land in the US., including international flights that were diverted to Canada. There's a very famous musical called Come From Away, which depicts a lot of folks coming to the US who basically got stuck in Gander, New Finland, for several days. You were on one of those flights, not to Gander, but to another town.

Bill Dudley (0:51)

St. John's, Newfoundland. So it was the same story. When we went to the play a few years later, when the play came out, they nailed it. It was exactly what it was like. And the thing that was most memorable to me was obviously, first, trying to understand what was actually going on in the United States.

Because the pilot wouldn't tell us when we landed. He just said, there's nothing wrong with the plane, and we'll tell you when we get on the ground. That's a pretty scary idea. But the thing that we remember the most is the kindness of the Canadians.

They took us in, they housed us, they clothed us, they fed us. We were there six days, sleeping in a church every evening. And every day, we'd go down to Walmart and buy some new underwear.

Romaine Bostick (1:32)

You know, it's good to hear these stories too, because amid all that tragedy, there was a lot of good that we got to see.

Bill Dudley (1:38)

A lot of heroism. I think about the first responders risking their lives to save people on that day. So yeah, so I think it's obviously a horrible event, a big tragedy, but there were also, people showed that they could rise to the occasion.

Romaine Bostick (1:53)

Yeah.

You know, that same day, we talk about the stock market shutting down, the treasury market shutting down, but there was something even more severe underneath the surface with kind of a breakdown in our payment systems and our liquidity, et cetera. You were at Goldman Sachs at the time, not at the Fed, but I am curious just from your seat, being at a major bank like that, when you finally did finally make it back to work, I mean, what was going on to try to get things back up and running?

Bill Dudley (2:17)

Well, people are obviously scrambling at the best they can. I think what we learn there is we need more resiliency. So one of the problems that we had that day is people had contingency sites in Jersey City. And Jersey City was not far enough away from Wall Street to actually have the necessary redundancy. So over the years, people now have second sites that are really in a whole different area code. So we have a lot more resiliency as a result of that event.

Tyler Kendall (2:44)

You are so deeply tied to the New York financial community and on such an emotional day, we thank you and appreciate you being here. And to Romaine's point, 9-11 really helped to cement the Fed's credibility as a crisis backstop. And we did want to get some of your thoughts today on the current policy outlook when it comes to the Fed. We got the CPI data. Markets have priced in a Fed rate hike, but if they don't deliver, what does that do to Fed credibility? Or are traders perhaps overreacting to the energy-driven inflation that we saw in the data today?

Bill Dudley (3:18)

Well, markets priced to about 90 percent probability of the Fed raising rates next week. Kevin Warsh has said that he believes in Fed independence. He's committed to the 2 percent inflation objective.

He gave a hawkish speech at Jackson Hole. So I think he's going to have to follow through with that and raise interest rates by a quarter percent. I'll be shocked at this point if they don't go ahead.

Tyler Kendall (3:38)

Shocked at this point, okay? That's a good backdrop here. Bloomberg had some reporting out earlier today that Fed officials may find rate hikes less potent when inflation is being driven by the supply side, AI-related factors, the war rather than demand. As a former New York Fed president, do you agree with that? And how does that impact how aggressive the Fed should be when it does start hiking?